Morrison’s tax cuts in doubt as Parliament unlikely to return in time

Prime Minister Scott Morrison has admitted that Federal Parliament is unlikely to be recalled before 30 June, which means his tax cuts of up to $1,080 per person could be delayed.

Maja Garaca Djurdjevic

May 22, 2019

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The Prime Minister told Sky News that the writs must be returned before Parliament is recalled, and given that there is a formal process in place, which could extend beyond the end of June, tax cuts could be off the table until next year.

The Tax Office announced last month that it does need a law change before it can enact tax cuts. But it also explained that if the law passes after June, it could retrospectively amend assessments to provide the tax cut once the law is passed.

“If the Labor party agrees to support the Coalition tax cuts as announced, then we would be able to update the tax withholding schedules, to allow the tax cuts to be reflected in people’s take home pay.

“However, we could not issue assessments based on the tax cuts until these are passed into law,” the ATO clarified last month.

Celebrating the Coalition’s win on Sunday, Treasurer Josh Frydenberg told media that the government will focus on delivering earlier promised tax cuts of up to $1,080 to Australians earning up to $126,000.

He added that Labor is expected to support this, having earlier backed the proposal.

However, Labor has said it supports the doubling of the tax offset for low and middle income earners - which would see people earning up to $90,000 receive a rebate of up to $1080 - but it has taken issue with the next stage of Morrison's tax plan. Namely, as promised earlier, the government's tax plan, to be rolled out by mid-2025, includes lowering the marginal tax rate to 30 per cent for everyone earning between $45,000 and $200,000.

In giving its update on Australian economies on Tuesday, the Reserve Bank highlighted the effect of the immediate tax cuts. It said that its latest forecast incorporates the increase in the offset announced in the 2019/20 budget.

"The forecast increase in household disposable income growth was supported by employment growth, a pick-up in wages growth and lower growth in tax payments, partly because of the introduction of the low- and middle-income tax offsets announced in the Australian Government 2019-20 Budget," the RBA said.

The Morrison government revealed in its budget that it plans to cut the corporate tax rate to 25 per cent by 2021-22 – five years earlier than previously planned.

It said that fast-tracking these lower taxes should benefit around 970,000 small and medium companies that employ over 5 million workers.